2013 (7) TMI 1033 - AT - Income Tax

Summary

Issues involved:
The issues involved in this judgment include the treatment of service tax as part of trading receipts u/s 145A for Assessment Year 2007-08, and the addition of liabilities under section 41(1) for both Assessment Years 2007-08 and 2008-09.

Assessment Year 2007-08:
The Appellant challenged the inclusion of service tax as part of trading receipts u/s 145A. The AO enhanced the trading profit by a specific amount and added it to the income of the assessee. The CIT(A) upheld the AO's decision, stating that service tax should be included as per section 145A, regardless of the sector. The ITAT, however, referred to decisions by the Hon'ble Delhi High Court and Chennai Bench, ruling that service providers acting as agents of the government are not liable to claim deductions for service tax. Consequently, the ITAT directed the AO to delete the addition u/s 145A and u/s 43B, as the liability did not arise on the last day of the accounting period.

The second issue pertained to the addition of a specific amount u/s 41(1) of the Act. The AO added the difference in liabilities due to certain parties to the income of the assessee under section 41(1). The CIT(A) confirmed this addition, citing discrepancies in the liabilities as booked by the assessee and other parties. The ITAT, however, noted that the AO did not allow cross-examination of the parties concerned, leading to a violation of natural justice. Consequently, the ITAT restored the issue to the AO for re-examination.

Assessment Year 2008-09:
The grounds raised in this appeal were identical to those in the assessment year 2007-08. Following the decision taken for the previous year, the ITAT directed the AO to delete the addition for Assessment Year 2008-09 as well.

In conclusion, the ITAT partly allowed the appeal for Assessment Year 2007-08 and allowed the appeal for Assessment Year 2008-09.